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19th July 2011

Bank of America needs $50bn additional capital

Bank of America will have to raise around $50bn in additional capital according to an analysis compiled by Bloomberg. Conservatively, the bank will have to find around $30bn extra to settle various claims relating to Mortgages, foreclosures and asset based securities. In addition Brian Moynihan, Bank of America CEO, appeared shocked that the US banking lobby lost the argument to restrict the additional Basel III levy for the Systemically Important Financial Institutions to a nominal amount. Instead banks such as BoA will have to find a further 2.5% capital on top of the 7% standard amount to make 9.5% Core Tier 1. This is to be required by 2013.


The analysts quoted by Bloomberg suggested that Bank of America was around 2.75% off the required CT1 level with each percentage point it has to raise equating to around $18bn, hence totalling around $50bn. One consequence suggested is that Bank of America will not have the opportunity to increase stock dividend by any significant amount for some time to come.